I. Economics
A) Basic eco problem
The basic eco problem is scarcity. Because of scarcity, every society must answer three key questions:
- What to produce? (e.g., food or weapons?)
- How to produce? (by hand or with machines?)
- For whom to produce? (who gets the goods?)
B) What is scarcity?
It means that resources are limited, but wants are infinite.
Example: If a country has a limited land, it must choose whether to use it to grow food or build housing. It cannot do both fully.
In short: Scarcity = limited resources + unlimited wants → choices must be made.
C) Factors of production
Resources used to produce goods and services:
- Land - natural resources (water, minerals, soil).
- Labour - human effort (workers).
- Capital - man-made tools and machines.
- Enterprise - the entrepreneur who organizes the other three and takes risks.
D) Opportunity cost
The next best alternative forgone when a choice is made.
Example: If you spend 10€ on a movie, your opportunity cost might be a meal you could have bought instead.
It's what you give up when you choose something else.
E) Demand
It's the quantity of a good or service that consumers are willing and able to buy at different prices.
When price goes down, demand usually goes up.
F) Supply
It's the quantity of a good or service that producers are willing and able to sell at different prices.
When price goes up, supply usually goes up.
G) Market equilibrium
Where demand = supply
- The equilibrium price is the price where buyers and sellers agree.
- If price is too high → too much supply.
- If price is too low → too much demand.
H) Market
Place (physical or online) where buyers and sellers meet to exchange goods and services.
I) Price mechanism
It's how the prices adjust to balance demand and supply.
- High prices signal producers to make more.
- Low prices signal producers to make less.
J) Micro-macroeconomics
- Microeconomics → studies individual markets (e.g., how one business sets the prices).
- Macroeconomics → studies the whole economy (e.g., inflation, unemployment, gross domestic product).
K) What is PPC (Production Possibility Curve)
It shows the maximum combination of two goods or services that a country can produce when all its resources are fully used.
L) Prices rise when Demand > Supply
If many people want something (high demand) but there is not enough of it (low supply)
→ Price goes up: Higher prices encourage producers to make more and consumers to buy less.
Example: New video game becomes super popular → many people want it → stores run out → price goes up → companies produce more → supply increases → price stabilizes.
M) Prices fall when Supply > Demand
If there's too much of a product and not enough buyers.
Price goes down → Lower prices encourage consumers to buy more and producers to make less.
Example: Farmers grow too many apples → lots left unsold → prices drop → more people buy apples → farmers produce less for next season.